January 2015 Sovereign Wealth Letter

Welcome to 2015, a year of hope, confidence, possibilities;  goals to attain, life to enjoy!   Welcome also to new readers.  You can review the whole letter or scan to find what fits your time and interest.  Any questions, hit “reply” and I’ll be back to you asap!

Since January 1st, investment news has been like popcorn.  Big international firms have analysts working 24/7 on reports that become obsolete within the hour.  Seldom has guidance been so disposable!   Never was it more vital to have conviction on how to invest securely for the future.  … We’ll return to this in a moment.


(i)  I’m away for minor surgery this Friday – returning Monday.

(ii) Federal RRIF and LIF income-schedules changed for you on Jan 1st.  Reach Ben or myself for any details.

(iii)  RRSP deadline this year is March 2nd.  If needing an RRSP loan let’s complete all papers by Feb 15th.

(iv) Jan 27th event: Empowering Women (2nd in series) focusing on “Who’s Helping Prepare Your Taxes” hosted by Silver And Gold Magazine at Burlington Central Library.  Learn how to reduce tax, maximize tax credits for disability and family caregiving, and more!  Bring a friend, open to all:  register at 905-220-0762.

(v) Helping a friend.  Freely share this monthly letter with friends, especially if they express worries about money, retirement, financial goals.  This letter can smooth the waters on money, debts, lifelong financial security;  retirement;  estate planning;  health funding for yourself or parents;  protecting Life and Wealth for your valued goals and dreams!

New year for you …for loved ones too:

Age 65+.   Did you know 1,000 Canadians will turn 65 each day this year?  Some could be related to you!  Do they have written financial plans to confirm how their money will last to age 90?  Do they have Wills?   Do they have Powers of Attorney to guide family members if health decisions are needed?  Do they know how a body would get back to Canada, or health costs be covered, if they died traveling outside Canada?   Have they visited the future so they can prepare the lifestyle they most want to enjoy?  … For you or your family, what do we need to discuss this year for financial, estate, health and retirement planning?  (Also see http://guaranteedincome4life.ca/blog/retire-re-wire-or-renovate-your-life/)  

Age 50+.  The youngest baby boomers are now age 50.  Stresses continue with high debts, career uncertainties, getting children launched into adulthood, and now even caregiving for their parents.  How can the sandwich-generation navigate all this in 2015?   Where do you want help?  …Let’s design the retirement you can secure now and enjoy when you’re ready.  Here’s a window into your future … http://guaranteedincome4life.ca/blog/retire-re-wire-or-renovate-your-life/

Younger generations ask if seniors will soak up all the pension money and health funding, leaving nothing to those who follow.  Are today’s younger people navigating their careers only to discover there could a total lack of social support systems when they reach their 60s and beyond?  What are the blatant facts you need to know?  …and let’s focus to protect your future and secure the life you want.  Here’s an item to share and discuss … http://guaranteedincome4life.ca/blog/young-professionals-want-financial-planning/ 

Claim your future now.   Leave nothing to chance.  Twenty years pass in a day.  Whatever challenges you feel, we can secure your freedom and wellbeing now and for the years to come.

Where were the biggest surprises of 2014?

Which of these surprised you the most?  What would you add?

  • Stock markets regained prior high after 6 years.
  • Interest rates now at their lowest since the 1600s.
  • Fewer part-time jobs; increase of full-time jobs.
  • Personalized names now available on coke bottle
  • Death of Robin Williams, Peter Pan, Mrs. Doubtfire.
  • Heightened racial tensions with police in the U.S.
  • Spreading immigration tensions in France, Germany, etc.
  • Russia annexed Crimea …ongoing conflict with Ukraine.
  • Ebola in west Africa:  lessons to avoid greater tragedies.
  • Disappearing planes & passengers in South Pacific.
  • ISIS, Boko Haram, increase of home-grown terrorism.
  • 25th anniversaries of Tiananmen Square, Berlin wall.
  • Favourable elections in Afghanistan and India.
  • Nobel prize to Malala Yousafsai and Kailash Satyarthi
  • Oil dropped 40%, energy stocks down 20-80%.
  • Ice-bucket challenge …fun helping others.

Early 2014 some warned the recovery from 2008 would fall off the rails & tumble 40%.  Some say the same today – as they do each year.  While easier gains since the 2008/2009 trough had been made, we kept our focus on continued economic growth.  I suggested we might find +/- 6% growth on the year as a whole.  I wasn’t far off.  If energy prices hadn’t burst in the 2nd half we might have gained 10% or more …but this sets up new opportunities for the year ahead.

A couple of readers have asked how the rising U.S. dollar affected our investing.  “Positive”:  Canadian funds with U.S. holdings gained from higher US$.  Canadian businesses are increasing exports to a growing US economy.  US consumers spent & demanded more Canadian goods & services.  45% drop in oil was moderated by 15% drop in the Cdn$.  “Negative”:  Canadian manufacturing takes longer to rebuild than it did to shrink.  Our manufacturers should have done more to upgrade systems and technology when our “looney” was stronger.  Currencies in 2014 poured into the US$ thus flattening returns in emerging / higher-growth economies.  Overall my view on US currency is cautious as it can swing back against us quickly.  Canadian funds include US equities; Global infrastructure funds own US properties.  Diversifying in this manner avoids having to gamble on currency.  Overall in 2014 this helped lift most clients’ returns without raising risk.

Who can forecast 2015?  

Weather and stock markets both will be choppy in the year ahead.  True as ever!

Pic  Printing MoneyMarkets will rise in 2015.  Having opened with a loss they may suddenly accelerate toward summer like 2011.  Or they may fall a few months now and then recover strongly in the 2nd half as in 2010.  No one knows – and this itself is worth knowing!  Thousands offer forecasts each day but the result is only known in hindsight.  As Mark Twain famously offered, “it’s difficult to make predictions, particularly about the future.”  Realizing what we cannot know, our investment strategies must benefit from what we do know.

Fundamental mandates:  this year will prove the resilience of dividend income, real estate income, infrastructure income, global corporate/govt bonds, compared to other assets.  See further in blog & resource tabs in this website.  

Senior Income Reservoir is an absolute “must” for retirees.  Don’t pull income out of assets that fall as often as they rise.  I’ve reviewed some accounts where advisors were investing seniors’ accounts 35% to 80% in the energy sector, which of course has plummeted with the drop in oil so there’s nowhere to safely draw income!  Vital always, we must ensure a safe reservoir for income you’ll be needing over the next 18-36 months.

Young and investing monthly:   picture yourself at 25, 35, 45 wanting to grow your wealth each month.  If you could meet Jack or Jill here, which would you want to be like?  Jack has a conservative fund that can drop 6% but seems likely to average 4% annual returns.   Jill has a more ambitious fund that might drop 15% but seems on track to average 9% annual returns.  Another thing to notice is that when markets fall, Jill gets a bigger bonus because her monthly deposit buys more than Jack will get.   This can help Jill build her investment 100% farther than Jack will do over the next 10 or 20 years.  Pardon the simplification but here’s the lesson:  use strategies that can accelerate your growth, while reducing the risk of having less money when you need it.

Oil and Gas:  much in the news right now, like all commodities these are the things Canadians expertly remove from the ground as raw materials.  Commodities in general are priced as they were in 2007, offering little or nothing for investors over the past 7 years, and no clear guidance on next steps.  Energy has been more active as oil peaked near $140/barrel in 2008 (falling to $40) …then peaked again at $105 last summer (now at $45).

Listening to the media you’d think this was bad news.  But ponder before you decide that!  Bad for producers and energy services.  Good news for energy consumers.  Bad news for Alberta and Newfoundland.  Good news for Ontario.  Bad news for energy-exporting countries, deficits and social programs.  Good news for importers like India, China, much of Europe etc.  If we say cheaper oil is a boost for Ontario, Europe, transport, retail, manufacturing, we can gain from this now, and also when oil rebounds to replenish producers’ profits and market values.

Emerging and Frontier countries have seen great change over the past year.  Some of these economies are now larger than G7 nations.  Some benefit (India) while others hurt (Venezuela) from the dropping price of oil.  Some will have elections this year, and a few will be heavily contested.  Some have heavy debts and political uncertainty (Argentina, Brazil).   If we say 30 countries are “emerging” and 60+ are “frontier” our fund managers are on guard to select the countries and strategies for this investing.

For example in Africa (The Economist, Jan 7th) the focus used to be diamonds, oil, precious/base metals …but today Africa’s higher-growth industries include manufacturing, telecommunications, transportation, finance, tourism, construction and infrastructure, fishing and agriculture.  And compared to Canada some of these economies such as S. Africa and Nigeria are more vigorously diversified.  The World Bank projects growth better than 5% for Africa in 2015 (double the world-average).  RBC agrees on this theme (2015 outlook) with EM/FM growth expanding at least twice as fast as the U.S. and other developed nations.

How are you celebrating 2015?  

What new experiences can you enjoy this year?  What needs or questions can we address right now while the year is young?  Let’s make it a great year!

Yours in financial security for LIFE!


Brian Weatherdon, MA CFP CLU CPCA MDRT
  1-877-937-3500 x 223  .  905-637-3500 x 223
627 Guelph Line, Burlington, Ontario. L7R 3M7
Amazon: “A Lifetime Of Wealth — And How Not To Lose It.”
** This monthly letter touches on key strategies in Canadian and global investing and financial planning. This letter is not an offer to sell any kind of security, insurance, or program. Historical returns and risk measures are not a valid guide to future performance. For information on near 10,000 investment funds and other financial structures please feel free to contact me directly. Returns shown are from Morningstar and other major financial news media. Research is sourced from leading sources including GLC, RBC, CIBC, Franklin Templeton, Mackenzie, and a wide range of highly reputed firms. Opinions reflected in this letter belong solely to the author and no other body is responsible for the content expressed here. We value opportunity to serve alongside your legal and accounting advisors with whom we can best protect your financial security and advance your goals. We are grateful always to receive your comments and questions.


1 comment

  1. Hi Brian, you nailed it.
    50+: stresses, career uncertainties, sandwich-generation.
    Retirement to secure now and enjoy when we’re ready!
    That is exactly where I am and how I feel.

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